IOSR Journal of Business and Management (IOSR-JBM)

e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 16, Issue 1. Ver. VI (Feb. 2014), PP 76-81
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The Impact of Human Resource Practices on Employee

Commitment and Employee Retention in Telecom Sector of
Pakistan: Exploring the Mediating Role of Employee Loyalty
Benish Hussain Janjua, Amir Gulzar
Foundation University Islamabad
Foundation University Islamabad

Abstract: The study is carried out to explore the impact of human resource practices on employee retention
and employee Commitment in the telecom Sector of Pakistan. It further investigates the mediating role of
employee loyalty with HRM practices, Employee Commitment and Employee Retention. The data was collected
through questionnaire. About 250 Questionnaires were filled from the employees of different telecom firms in
Rawalpindi and Islamabad. For interpretation and analysis of data Correlation, Regression and Sobel Tests
were conducted. The results showed that different human resource practices have a significant impact on the
employee commitment and employee retention. Further the result revealed that loyalty mediates the relation of
HRM and Employee Commitment and the relationship of HRM and Employee Retention.

I.

Introduction:

Human resource is deemed to give competitive advantage to companies because in addition to

production related capacities it also takes human capital into account. It is easy for competitors to copy other
resources like technology and capital but the human resource are distinctive and not easy to imitate. According
to Khatri (1999) cited in Tiwari (2012) personnel of a company are one of the most important factors that
provide flexibility and adaptability to organizations. With mediocre employees a business can do well but with
capable employees a business flourishes at a greater pace. In the same way the employees with terrible qualities
can make a business collapse shifting to a downfall. Having a pool of good employees and developing their
loyalty becomes extremely important and a continuing challenge. Constant and systematic approach to
recruitment and selection and training and development reduces moving from one job to another job and ensures
long-term employment; internal promotion practices with a little recognition given to seniority and the
implementation of the productivity-linked wage system would create a more committed employee towards the
company.
It is crucial that the management tries to retain companys best workforce and maintain their
commitment to the organization in order to attract additional quality employees. It is important for researchers to
have a basic focus of researchers in their knowledge creation for employment, organizations and related fields
(Scarpello, Ledvinka, & Bergman, 1995).
Sohailet (2011) enlightened that employee retention as an important process. Nowadays, organizations
are experiencing a balance of power shifting from employers to employees. Employees can be retained and
satisfied within those organizations which keep on learning that how to keep their employee satisfaction at the
highest level. If there is excess of turnover then it indicates towards a basic problem within the company and for
such organization it is important to be familiar with how to retain employees. Attracting in retaining the
employees in emerging countries is highly desired practice of the high performance organizations. One of the
most used ways of retaining employees is compensating them more than they are earning. Also after some years,
the competition will be fierce and having the best talent in the company will be a challenge.
Rathnaweerage, R.(2010), Human Resource Management practices and their outcomes such as
employee satisfaction, commitment and retention. The study is carried out in Sri-Lanka. The respondents were
the Srilankan Public sector bankers. The result of the study showed that Most of the HRM practices have a
positive impact on the Employee retention, Employee Commitment and Employee Satisfaction.
In Pakistan the concept of HRM practices with Employee Commitment and Employee Retention is
never carried out specifically in the telecom sector of Pakistan. The study is not only focusing on the
relationship between independent and dependent variable but has an additional mediating variable (Loyalty) to
investigate the relationship which is as an additional contribution to the study.
So the study aims to observe the impact of Human resource management practices on employee
retention and employee commitment in the five telecommunication companies of Pakistan. Human resource
management practices taken are recruitment and selection, training and development, performance appraisal,
compensation and social benefits and grievance handling system. Furthermore, loyalty of an employee is taken
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The Impact of Human Resource Practices on Employee Commitment and Employee Retention in
as the mediating variable here. Therefore, it is hoped that the study can contribute to the growing literature by
examining the impact of human resource management practices on employees retention and commitment in
Pakistan context.
Objective of the Study
1. To explore the relationship of HRM practices and Employee Commitment
2. To explore the relationship of HRM practices and Employee Retention.
3. To examine the relationship of HRM practices and Loyalty
4. To examine the relationship of Loyalty and Employee Commitment
5. To prospect the relationship of Loyalty and Employee retention
6. To inspect the mediating role of Loyalty on the relationship of HRM practices and Employee
Commitment
7. To explore the mediating role of Loyalty on the relationship of HRM practices and Employee
Retention.
Significance of the Study
Currently this research would be significant in diagnosing the success of HRM practices. The Study
has its importance in explaining the implementation of HRM practices and their Contribution towards the
success keeping the employee within the organization. The study excellence lies in the facts on how to increase
the Employee Commitment and to gain the employee loyalty by lowering the turnover rate. The result of the
Study would help in developing a better understanding on how to manage the HRM practices keeping in view
the dimensions of Employee Commitment, Employee Retention and Loyalty. This research is the guidance tool
for the telecom companies as it provides the company with the information that fair HRM practices has greater
impact on the Employee retention rate and their commitment to the firm.

II.

Review Of Literature

According to Amstrong (2009) Human resource management (HRM) is a strategy of incorporating

approach to employment, development of those employees and working for well being of people in an
organization. The five broader categories of Human resource management are people staffing, learning and
development, compensation management, performance appraisal and employee relations. Oya Erdil & Ayue
Gunsel states that for the proper achievement of firm strategy, the creation of capable personnel should start
from the very initial level i.e. selection of employees according to the skills and behaviors that are desired in
accordance with the context of the company.
Khan et. al (2012) concluded that training is deemed by employees to impact on their productivity and
also has a positive effect over organizations performance. Training produces effects on two things: Job skills
enhancement (Skill enhancement is giving the employees' awareness with new practices encouraging the skills
of the workers related to a specific job) and Promotion of employees (In a competitive environment, a company
invests not only in technological advancements but also the creation of human capital through extensive
training). However, research study by Shah et. Al (2012) suggested that training has a considerable effect on
employee development which creates a worthy effect on the performance of an organization. Development of
employees through learning and intellectual capabilities expansion makes the working on job maintained at a
higher level which successively increases the organizational performance (Kira et. al (2010) cited in Shah et. al
(2012). According to Riaz & Ramay (2010) job satisfaction is the employees positive attitude towards a job and
performance appraisal leads to career development which ultimately leads to job satisfaction. Similarly
Yasminet (2012) concluded that HR systems impact the organizations performance and one of the key factors
for the growth of telecom sector. While, Mohammad et. Al (2009) found out that incentives have a positive
impact of organizational performance but did not affect the relationship between HR practices and efficiency of
the organization (an investigation within manufacturing companies of Malaysia). So, a good HR system can
enhance the performance of the organization even if incentives are not incorporated.
Correspondingly, Hooi Lai Wan stated that as Japan is a labor intensive country so it needs to
essentially analyze the role of HR policies to enhance employee loyalty. Syed & Yan (2012) tried to see the
association between high performance human resource management practices and job rotation in the telecom
sector of Pakistan which revealed that there is a positive association between the two variables. The factors that
enhance the relationship are employee empowerment, job rotation (knowledge, skills and abilities boost), Merit
based promotions and performance based pay are surely related with employee job satisfaction. Gardner et al.
(2003) demonstrated the relationships between HR practices and organizational commitment in addition to
operational and financial performance measures. Employees who are managed in accordance with the HR
practices turn out to be highly committed to their organization. So, overall operating expenses lessen and
profitability increases.
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The Impact of Human Resource Practices on Employee Commitment and Employee Retention in
Based on the above discussion following hypothetical interaction and hypothesis may be inferred:

Source: Researchers Proposed Model

Hypothesis:
H-1 Loyalty positively influences the Employee Commitment.
H-2 Loyalty positively influences the Employee Retention.
H-3 Fair recruitment and Selection positively influence strong Employee commitment.
H-4 Fair Recruitment and selection leads to high Employee Retention.
H-5 Training and development positively influences strong Employee commitment.
H-6 Training and development leads to high Employee Retention.
H-7 Fair Performance Evaluation positively influences strong Employee commitment.
H-8 Fair Performance Evaluation leads to high Employee Retention.
H-9 Promotion Practices positively influence strong Employee commitment.
H-10 Promotion Practices lead to High Employee Retention.
H-11 Fair Compensation and Social Benefits positively influence Employee Commitment
H-12 Fair Compensation and Social Benefits positively influence the Employee Retention
H-13 Grievance Handling System influences positively on Employee Commitment
H-14 Grievance Handling System influences positively on Employee Retention
H-15 Loyalty mediates the relationship of Recruitment and Selection and Employee Commitment.
H-16 Loyalty mediates the relationship of Training and Development and Employee Commitment.
H-17 Loyalty mediates the relationship of Performance Evaluation and Employee Commitment.
H-18 Loyalty mediates the relationship of Promotion Practices and Employee Commitment.
H-19 Loyalty mediates the relationship between Fair Compensation and Social Benefits and Employee
Commitment
H-20 Loyalty mediates the relationship between Grievance Handling System and
Employee Commitment
H-21 Loyalty mediates the relationship of Recruitment and Selection and Employee Retention.
H-22 Loyalty mediates the relationship of Training and Development and Employee retention.
H-23 Loyalty mediates the relationship of Performance Evaluation and Employee retention.
H-24 Loyalty mediates the relationship of Promotion Practices and Employee Retention.
H-25 Loyalty mediates the relationship between Fair compensation Management and Social Benefits and
Employee Retention.
H-26 Loyalty mediates the relationship between Grievance Handling System and Employee Retention

III.

Methodology

The Research Study is causal and Cross-Sectional in nature inspecting the impact of HRM practices on
Employee Retention and Employee Commitment with a mediating role of Loyalty in Telecom sector of
Pakistan. Questionnaire of Rathnaweerage, R. (2010) is selected for data collection..The first part of the
Questionnaire was to measure the demographics and the second part was to assess the information related to
HRM practices, Employee Commitment, Employee Retention and Loyalty. Data was collected from 250
employees of telecom companies that were Telenor, Warid, U-fone, Zong and Mobilink. The response rate is
95%.
Cronbachs Alpha reliability for each variable was above 0.7 ensuring that the data is internally consistent.

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The Impact of Human Resource Practices on Employee Commitment and Employee Retention in
4.Data Analysis and Discussion
Regression, Correlation and Sobel Test were conducted to analyze the data and to inspect the
hypotheses. The Sobel Test is conducted but before that correlation and regression was applied as it is one of the
perquisites of Sobel Test.
4.1 Hypothesis Testing
Table 4.1.1 Regression Analysis of Employee Commitment and Employee Retention on Loyalty
Employee Commitment*
Beta
t
Loyalty

0.952

10.662

Employee Retention*
Beta
t

Sig.
0.000

0.983

8.626

Sig.
0.000

*dependent variable
Table 4.1.2 Regression Analysis of HRM practices on Employee Commitment and Employee Retention
respectively.
Employee Commitment*

Employee Retention*

Independent Variables
Recruitment and Selection

Beta
0.923

t
26.131

Sig.
0.000

Beta
0.847

t
17.283

Sig.
0.000

Training and Development

0.007

0.81

0.935

0.029

0.311

0.756

Performance Evaluation

0.127

1.388

0.168

0.041

0.446

0.656

Promotion Practices

0.87

0.951

0.343

0.099

1.082

0.282

Compensation and Social

Benefits

0.780

13.518

0.000

0.734

11.738

0.000

Grievance Handling System

0.965

39.819

0.000

0.878

19.939

0.000

*dependent variable
The first hypothesis of the study was that Loyalty positively influences the employee commitment. According to
the table of regression Analysis p-values shows the significant relationship of the loyalty and employee
commitment hence hypothesis stood true. The impact of the loyalty as per Beta value i.e. 0952 with employee
commitment has found almost 95%. The second hypothesis stated that loyalty positively influences the
employee retention. According to the table of regression Analysis p-values shows the significant relationship of
the loyalty and employee retention proving the hypothesis true. The impact of the loyalty as per Beta value i.e.
.0983 on Employee Retention is found almost 98%.
The third hypothesis is that the fair recruitment and selection positively influence employee
commitment. According to the table of regression analysis there is a significant relationship. The impact of
recruitment and selection as per Beta value i.e. 0.923 on employee commitment which is 92%. The fourth
hypothesis of the study was that fair recruitment and selection significantly influence employee retention.
According to the table, there is a significant relationship. The impact of recruitment and selection as per Beta
value i.e. 0.847 on employee retention which is 85%. The fifth hypothesis is that training and development
positively influence employee commitment is rejected by the results shown in the regression table as per pvalue. The sixth hypothesis is training and development positively influences employee retention is also
rejected due to insignificant p-value. The seventh hypothesis that fair performance evaluation system positively
influence employee commitment proved wrong as due the insignificant p-value. According to the table of
regression analysis there is no significant relationship. The eighth Hypothesis was that fair performance
appraisal system positively influences employee retention. According to the table of regression analysis there is
no significant relationship so null hypothesis is accepted. The ninth hypothesis was that promotion practices
positively influences employee commitment. According to the table of regression analysis there is no significant
relationship.
The tenth hypothesis that Promotion Practices positively influence Employee Retention could not
proved as the p-value was not significant. The eleventh hypothesis was that fair compensation and social
benefits positively influence employee commitment. According to the table of regression analysis there is a
significant relationship. The impact of fair compensation and social benefits as per Beta value i.e. 0.780 on
employee commitment which is 78%. The twelfth hypothesis was that fair compensation and social benefits
positively influences employee retention. According to the table of regression analysis there is a significant
relationship. The impact of fair compensation and social benefits as per Beta value i.e. 0.734 on employee
retention which is 73.4%. The thirteenth hypothesis was that grievance handling system positively influences
employee commitment. According to the table of regression analysis there is a significant relationship. The
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The Impact of Human Resource Practices on Employee Commitment and Employee Retention in
impact of grievance handling system as per Beta value i.e. 0.965 on employee commitment which is 96.5%. The
fourteenth hypothesis was that grievance handling system positively influences employee retention. According
to the table of regression analysis there is a significant relationship. The impact of grievance handling system as
per Beta value i.e. 0.878 on Employee Retention which is 87.8%.
Sobel test Statistics
L as a mediator in the relationship of
Recruitment and selection and Employee Commitment
L as a mediator in the relationship of
Compensation and Social Benefits and Employee Commitment
L as a mediator in the relationship of
Grievances Handling System and Employee Commitment
L as a mediator in the relationship of
Recruitment and Selection and Employee Retention
L as a mediator in the relationship of
Compensation and Social Benefits and Employee Retention
L as a mediator in the relationship of
Grievances Handling System and Employee Retention

p-Value

18.15861025

11.935055

21.44488899

20.35637979

12.450627

24.96027439

Table 4.1.3 Sobel Test for the mediation of Loyalty

L: Loyalty
Sobel test was conducted for the testing of mediation among the variables. As training and
development, performance evaluation and promotion practices could not found significant in the regression
analysis so their test for mediation was not checked as they failed to fulfill the criteria for mediation. So the
hypotheses 16, 17, 18, 22 , 23 and 24 could not proved true. The fifth hypothesis of the study was that the
loyalty mediates the relationship of recruitment and selection and employee commitment. The p-value of the
Sobel test shows that mediation exist and hypothesis proved true. The nineteenth hypothesis stated that loyalty
mediates the relationship between fair compensation and social benefits and employee Commitment. The Pvalue of the Sobel Test shows that mediation exist hence the hypothesis proved true. The twentieth hypothesis
of the study was that Loyalty mediates the relationship between grievance handling System and employee
commitment. The p-value of the Sobel test shows that Mediation exists and hypothesis proved true. The twentyfifth Hypothesis of the study was that loyalty mediates the relationship between fair compensation and social
benefits and employee retention. The P-value of the Sobel Test shows that mediation exist hence the hypothesis
proved true. The twenty-sixth hypothesis of the study was that loyalty mediates the relationship between
grievance handling system and employee retention. The p-value of the Sobel test shows that Mediation exist and
hypothesis proved true.
4.2 Conclusion:
The study concluded the following:
1. Loyalty has greater influence on employee retention as compare to employee commitment.
2. The recruitment and selection has greater impact on employee commitment as compare to employee
retention.
3. The impact of compensation and social benefits on employee Commitment is greater as compare to the
impact on employee retention.
4. Employee commitment and employee retention has a positive relationship with the grievances handling
system where grievance handling system has more influence on employee committeemen.
5. Loyalty acts as mediator in the relationship of recruitment and selection and Employee Commitment,
relationship of compensation and benefits and Employee Commitment and relationship of grievances
handling system and Employee Commitment.
6. Loyalty acts as mediator in the relationship of recruitment and selection and employee retention,
relationship of compensation and benefits and employee retention and relationship of grievances
handling system and employee retention.

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